Correlation Between Digjam and Zomato

Can any of the company-specific risk be diversified away by investing in both Digjam and Zomato at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Digjam and Zomato into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digjam Limited and Zomato Limited, you can compare the effects of market volatilities on Digjam and Zomato and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Digjam with a short position of Zomato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digjam and Zomato.

Diversification Opportunities for Digjam and Zomato

0.2

Correlation Coefficient

Digjam  Zomato

Modest diversification

The 3 months correlation between Digjam and Zomato is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Digjam Limited and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato Limited and Digjam is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Digjam Limited are associated (or correlated) with Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of Digjam i.e., Digjam and Zomato go up and down completely randomly.

Pair Corralation between Digjam and Zomato

Assuming the 90 days trading horizon Digjam Limited is expected to under-perform the Zomato. In addition to that, Digjam is 1.65 times more volatile than Zomato Limited. It trades about -0.17 of its total potential returns per unit of risk. Zomato Limited is currently generating about 0.09 per unit of volatility. If you would invest  27,331  in Zomato Limited on September 24, 2024 and sell it today you would earn a total of  879.00  from holding Zomato Limited or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Digjam Limited  vs.  Zomato Limited

Digjam Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digjam Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Zomato Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zomato is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digjam and Zomato

The main advantage of trading using opposite Digjam and Zomato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digjam position performs unexpectedly, Zomato can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zomato will offset losses from the drop in Zomato's long position.

The idea behind Digjam Limited and Zomato Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.